Credit: Dealing with a big-spending spouse

Still living off credit cards? Can't figure out how much you could or should spend? Need to save for retirement? Deborah McNaughton, a Placentia credit expert, financial coach and author of “The Essential Credit Repair Handbook,” is here to provide her financial advice:

Q. My husband and I have separate credit card accounts. He refuses to discuss our finances. I discovered that he has overextended his credit and fallen behind in making his payments. Will my credit report be affected too?

A.The worst thing to do in a marriage is to keep secrets – especially when it comes to money. It is important when you are married to keep each other informed on everything that pertains to your finances. Should your spouse die and you were not aware of the condition of your finances before your spouse's death, tremendous pressure and problems could result because of this lack of communication. The bills are still due and payable even with the death of a spouse.

You need to know what credit card debts each of you has, what life insurance your spouse has and the location of the policy. You also need to know of any bank accounts, retirement funds, and stocks and bonds.

Many times the person who is the compulsive spender will try to hide credit card purchases. If the spending gets out of control where the credit card bills are too high and they can't be paid, that's usually when the confession comes.

In a community-property state, both husband and wife are responsible for repayment of the debts. The credit cards that are in your husband's name and not yours will affect only his credit rating. Credit card companies report the payment history on your credit report only when your name is listed on the credit card.

The best thing to do is write out a plan for repayment that both you and your husband can live with. Consolidating the credit card debt into one credit card may be an option. That would mean transferring balances from one credit card to another lower-interest credit card. If you own a home, you could consider taking out a consolidation loan to pay the credit card companies.

Whatever solution you decide on to repay your husband's debts, I would suggest you limit yourself to using one credit card each. With the credit cards that you pay off, put them in a safe-deposit box or freeze them in a block of ice. You need to make it difficult to use and limit the temptation of using them.

In the past it was always recommended to close all your accounts, but with the credit scoring system a portion of the score is derived from the balance vs. the credit limit. You can have credit without debt! Just pay the balances off each month or at least add extra money to the minimum payment.

When you pay off one card, don't celebrate yet. Take the payment you were making on the one card and add it to the next credit card payment. Do this until all the debts are paid off.

More importantly, learn from your mistakes. Communicate with each other. Break old habits!

Get more advice on digging out of debt on Deborah McNaughton's website, financialvictory.com

Do you have questions about credit, dealing with debt or budgeting? Send your questions to moneymatters@ocregister.com with “credit question” in the subject line. Please include your name and a phone number where you can be contacted; they will not be published.

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